Monthly Archives: June 2010

The Casey Files – by David Galland, Managing Director, Casey Research
June 29, 2010

Scanning through a local newspaper this week, I came across a letter to the editor that speaks volumes about the popular misconceptions that are dragging this country, and the world, to its knees.

The letter writer, a retired public school teacher, unleashed a litany of solutions for making America’s children better citizens. Summarizing his list (the exclamation points are his, too):

Give parents a livable wage!

Provide excellent subsidized childcare!

Guarantee parental leave with full pay and wage protection.

Institute a single-payer health care system.

Regrettably, the gentleman’s perfect-world vision of how things should work is not his alone, but is widely shared. Unfortunately for him and his demanding ilk, it is a vision now made obsolete by the facts on the ground.

Simply, the nation – and most of the so-called developed world – is broke. As is the model that these modern-day economies have been built on – a model that foolishly assumed that politicians could be trusted to manage a currency in a responsible fashion.

Consider, in the 1940s central bank reserves were 70% gold. Today, official reserves are only about 10% gold, even though the price of gold is far higher. The balance of those reserves, for all intents and purposes, is nothing more than IOUs.

Out of a justifiable fear of being repetitious, I’m not going to belabor the point. But I am going to comment that it’s time for people to grow up… to get real about the situation we are in.

To believe that a government that produces nothing can paper over every crisis, as well as provide succor and sustenance to meet every human desire, and can do so infinitely and without a serious consequence, is to believe in tooth fairies and magical beasts that dance through distant woods.

Even so, like the letter writer, there is still a large block of Americans who persist in believing in such a fantastical world – a world where government’s largess should be extended even further. From this crowd you would get rousing cheers to the suggestion that the state should also provide a free and top-notch education to all, quality foodstuffs for both the domestic and foreign needy, high-quality computers (and free Internet connectivity) to every young student, housing subsidies, and open-ended unemployment benefits. And that’s just the short-list.

Back in the real world, the declarative statement “I want” has to now be followed with “and here’s how I’ll be able to save up for it.” That’s because even a casual glance at the nation’s finances confirms that the government’s fiscal, monetary, and social policies have been an abject failure… an unmitigated disaster.

While I could illustrate that contention with enough citations to fill a large book, in the interest of brevity I’ll point only to an excerpt from a Globe & Mail article today on the dire state of California’s finances, a fast-moving crisis that can be considered the off-Broadway version of the larger drama now playing out in these United States…

California on ‘verge of system failure’

It’s a story that’s being repeated all across California – and throughout the United States – as cash-strapped state and local governments grapple with collapsed tax revenues and swelling budget gaps. Mass layoffs, slashed health and welfare services, closed parks, crumbling superhighways and ever-larger public school class sizes are all part of the new normal.

California’s fiscal hole is now so large that the state would have to liberate 168,000 prison inmates and permanently shutter 240 university and community college campuses to balance its budget in the fiscal year that begins July 1.

None of this would matter much to anyone outside the not-so-Golden State except that California’s budget crisis is a harbinger of a grim dilemma that all Americans will soon confront. The country has built an elaborate and costly government machine, tied to a regressive tax system that can’t generate enough revenue to pay for it all.

Naturally, we want to think of America as America the beautiful. Taking off the rose-tinted glasses, however, presents a different image altogether… that of a bankrupt, highly militarized, and hair-triggered socialist empire that is daily finding new ways to tax its struggling citizenry and tramp all over the Constitution.

Not to be overly dramatic, but the real face of America is increasingly like that of an early-middle-aged woman I saw the other day. She was wheelchair bound, with only one leg, her overweight body covered in poorly rendered tattoos. With a cigarette hanging from the corner of her mouth, she rolled out of a liquor store, a telling brown paper bag in her lap. In other words, the very picture of a life dominated by bad decisions.

While America hasn’t yet been laid so low, it would be a mistake to think it can’t – and won’t – happen. If its leaders and a majority of the population persist in their ignorance of the causes and effects of economic failure, it is all but certain.

And it’s not just economics. Over the weekend I re-read both the Declaration of Independence and the Bill of Rights, and it struck me that if the Founding Fathers were alive today, they would be considered terrorists and rounded up. Furthermore, because the Bill of Rights has been all but voided at this point, they might be dropped into the equivalent of a dark hole with no right to a speedy trial, or any trial at all, for that matter.

Trading our freedoms for security is a bad decision because, in the end, the nation will be neither free nor secure. Much in the same way that, to paraphrase one sage, a government that habitually saves all fools from their bad decisions, ultimately creates a nation of fools.

Fools that, like the letter writer, are clearly not self-made but rather look to the coddling nanny-state to guarantee an agreeable lifestyle. By virtue of the massive wealth that its post-WWII hegemony provided the United States, the nation’s finances could support – for a time – an increasing crowd of moochers. But that wealth is now gone, leaving in its place the world’s largest debtor.

And so it is that in the world now emerging, one where reality trumps fantasy, when talk turns to further stimulus, the conversation should no longer revolve around the ways that the government can prime the economic pumps with yet more borrowing and spending. That’s how we got here in the first place, and a sure road map to an even worse catastrophe.

The continued failures of the government’s misguided efforts can be seen in the latest bad news on the housing market – bad news we warned subscribers to The Casey Report to expect for months now.

Sales of U.S. New Homes Plunged to Record Low in May

June 23 (Bloomberg) – Purchases of new homes in the U.S. fell in May to a record low as a tax credit expired, showing the market remains dependent on government support.

Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.

In the new world, the conversation should – must – turn to the proven ways that government can stimulate the economy; mostly by removing itself and its tax and regulatory burdens from as many areas of the economy as possible.

The world is only going to get more competitive – witness Russia’s decision to eliminate capital gains taxes on foreign investment in that country – and an America dominated by a government lacking all fiscal restraint, urged on by a populace without even a basic understanding of economics, has little chance at remaining in contention. The situation is only made worse by a weakening of the rule of law, concurrent with a regulatory jungle that is only growing more tangled by the day.

Unfortunately, Paul Krugman, reigning champion of the crowd calling for saving the economy by pumping out yet more unbacked government stimulus, is now being trotted out as a possible replacement for the soon-to-be-vacated job of White House budget director. If he secures the position, then all may not be lost, but it soon will be.

The outlook isn’t rosy – but there are still things you can do to protect your assets. …

Israeli leaders are facing more legal action from rights activists who are filing new lawsuits in connection with Israel’s war crimes against Palestinians in Gaza.

Two Belgian lawyers filed an indictment on Wednesday on behalf of more than a dozen Palestinians, calling for some 14 Israeli officials to stand trial for crimes against humanity and war crimes allegedly committed during Tel Aviv’s December 2008-January 2009 offensive against the Gaza Strip.

The list comprises of various politicians and military and intelligence officials — including Defense Minister Ehud Barak, then Foreign Minister Tzipi Livni, and former Prime Minister Ehud Olmert — who had a role in the deadly onslaught The Jerusalem Post quoted Hungarian News Agency MTI as saying.

The indictment defines Israel’s deliberate targeting of places known to hold civilians as well as attacks on plantations and water systems, among other things, as war crimes committed during the 22-day offensive that killed more than 1,400 Palestinians and left thousands more injured.

Belgium’s “Universal Jurisdiction” law allows for the trial of war criminals in Belgium while the events in question took place elsewhere.

A Brussels court granted a war crimes suit against former Prime Minister Ariel Sharon in 2001. Fears of facing legal action in the country also made Livni refrain from traveling to Belgium as Israel’s foreign minister in 2009.

Meanwhile, a group of Greek activists plan to sue senior Israeli officials for their role in the May 31 deadly attack on a Gaza-bound aid convoy and the killing of several civilians onboard the fleet while it was in international waters.

The 33 Greek nationals, who were accompanying the Gaza Freedom Flotilla when it came under fire, accuse high-ranking Israeli officials, including Barak and Chief of Staff Gabi Ashkenazi of violating international laws by attacking the flotilla in international waters.

I wish I could have something to say about the miracle of humanity, their selfless and generous giving to help their fellow human beings, the nobility of spirit, extending friendship to all, their sincere pursuit of truth but…sadly. .. this is not so prevalent as some may like to believe. It it was true, the world would be a totally different place today.

Some say there is a deliberate numbing or dumb-down of the general population but it is also an observable fact that people generally, as a result of monumental stupidity, cannot/will not see through the spin and propaganda in the main stream media – even if contrary facts are painfully presented to them to the extent that logical thinking is overtly rejected and denied. Many times, the ego and emotional side of humanity play the obstructionist role. The need to ‘win’ an argument at ANY cost reveals the extent of the stupidity. An example is given below.

Despite the fact that their own media has reported their own spy agencies admitting that there is no Al Qaeda, some people will still stubbornly hold the view that there is an Al Qaeda. One could also watch the BBC videos on the LIVE coverage for that site, but is unable to ask themselves how is this possible that the same BBC can announce the WT7 falling 20 minutes before it did. Here we have a classic example of self dumbing down in free-fall.

Yes there are bad Muslims, but there are also bad people of various religious faiths as well. It would seem that extremists from all sides wish to have a destructive clash so that THEIR messiah can be brought forth. What kind of Messiah will this be if the condition for bringing forth of their Messiah is via massive blood shedding? Will this not be a blood sacrifice of Biblical proportion? What about the inviolable commandment ” Thou shall not kill”?

No amount of talking, persuading, reminding, logic, facts, even evidence is going to work for those who are unable to see the truth. Most likely it will make them angry or confused.

So now we see some people screaming at how bankers, financiers, politicians, insurance companies, your friendly investment broker etc..can milk, steal and prevail their crimes upon their victims and get away virtually scot free. They may even marvel? at the immunity of corrupted Powers That Be, yes they are enemies, but…there are other enemies like, ignorance, clueless, wilful stupidity… and so on. Some may use all the right sounding words, spoken openly for social impact but are treated no differently from a dirty tissue paper, to be discarded once used.

As the saying goes, it is something like this. Sickness may be treated, ignorance may be overcome, knowledge may be learned, even wisdom may be acquired…but stupidity… …it lasts forever!